P14. Provisions for pensions and employment contracts

Pension obligations and pension expenses

The vast majority of employees in TeliaSonera AB are covered by a defined benefit pension plan (the ITP-Tele plan and ITP 2 plan) which means that the individual is guaranteed a pension equal to a certain percentage of his or her salary. The pension plan mainly includes retirement pension, disability pension and family pension. All employees born in 1979 or later are covered by a defined contribution pension plan (the ITP1 plan).

Most pension obligations are secured by Telia Pension Fund. Certain commitments, such as certain supplementary individual pension benefits and a right under the employment contracts for certain categories of personnel to retire at age 55, 60, or 63, are provided for by taxed reserves in the balance sheet.

Pension obligations are calculated annually, as of the end of the reporting period, based on actuarial principles.

SEK in millions

Dec 31, 2015

Dec 31, 2014

Opening balance, pension obligations covered by plan assets

1,586

1,594

Opening balance, pension obligations not covered by plan assets

427

488

Opening balance, total pension obligations

2,013

2,082

Current service cost

24

24

Interest cost, paid-up policy indexation

105

60

Benefits paid

-127

-139

Divested operations

0

0

Other changes in valuation of pension obligations

-15

-16

Termination benefits

6

2

Closing balance, pension obligations covered by plan assets

1,569

1,586

Closing balance, pension obligations not covered by plan assets

436

427

Closing balance, total pension obligations

2,005

2,013

of which PRI Pensionsgaranti pensions

1,357

1,365

The fair value of plan assets changed as follows.

SEK in millions, except percentages

Dec 31, 2015

Dec 31, 2014

Opening balance, plan assets

2,358

2,109

Actual return

63

248

Closing balance, plan assets

2,421

2,358

Actual return on plan assets (%)

2.7

11.8

Provisions for pension obligations were recognized in the balance sheet as follows.

SEK in millions

Dec 31, 2015

Dec 31, 2014

Present value of pension obligations

2,005

2,013

Fair value of plan assets

-2,421

-2,358

Surplus capital in pension fund

852

772

Provisions for pension obligations

436

427

Total pension expenses (+)/income (-) were distributed as follows.

SEK in millions

Jan–Dec 2015

Jan–Dec 2014

Current service cost

24

24

Interest cost, paid-up policy indexation

105

60

Less interest expenses recognized as financial expenses

-16

-27

Actual return on plan assets

-63

-248

Divested operations, pension obligations

0

0

Other changes in valuation of pension obligations

-15

-16

Termination benefits

6

2

Pension expenses (+)/income (-), defined benefit pension plans

41

-205

Pension premiums, defined benefit/defined contribution pension plans and other pension costs

55

55

Pension-related social charges and taxes

51

30

Less termination benefits (incl. premiums and pension-related social charges) reported as restructuring cost

-6

-2

Pension expenses (+)/income (-)

100

83

Decrease (-)/Increase (+) of surplus capital in pension fund

80

257

Recognized pension expenses (+)/income (-)

221

135

of which pension premiums paid to the ITP pension plan

5

5

Principal actuarial assumptions

The actuarial calculation of pension obligations and pension expenses is based on principles set by PRI Pensionsgaranti and the Swedish Financial Supervisory Authority, respectively.

The principal calculation assumption is the discount rate which, as a weighted average for the different pension plans and, as applicable, net of calculated yield tax, was 3.2 percent in 2015 and 3.4 percent in 2014. Obligations were calculated based on the salary levels prevailing at December 31, 2015 and 2014, respectively.

Plan-asset allocation

At the end of the reporting period, plan assets were allocated as follows.

Asset category

Dec 31, 2015

Dec 31, 2014

SEK in millions

Percent

SEK in millions

Percent

Fixed income instruments, liquidity

1,344

55.5

1,136

48.2

Shares and other investments

1,077

44.5

1,221

51.8

Total

2,421

100.0

2,358

100.0

of which shares in TeliaSonera AB

Future contributions and pension payments

As of December 31, 2015, the fair value of plan assets exceeded the present value of pension obligations. Unless the fair value of plan assets during 2016 should fall short of the present value of pension obligations, TeliaSonera AB has no intention to make any contribution to the pension fund.

In 2016, pension payments from the defined benefit plans are expected to be SEK 105 million.

© TeliaSonera 2015
In the event of any differences between this online version of the Annual and sustainability report and the printed version, the printed version shall prevail.